Provident expects loans setback

PROVIDENT Financial, the consumer credit company facing a Competition Enquiry, has admitted it expects growth in its core UK doorstep lending market to continue to decline.

Chief executive Robin Ashton said the company is facing fierce competition from credit card companies and expects growth to slow from its current 3% per year.

The company, which specialises in small loans of around £200 to people on low incomes, admitted the number of UK borrowers and the amount of credit issued had fallen by 5.2% when it reported a 1.7% fall in half-year pre-tax profits to £60.1m in July.

It has around 1.5mn customers in the UK, served by around 12,000 agents.

Ashton said: 'We had a good rate of growth following the recession in the early nineties, until about 1997. In the credit boom over the last few years our lending has been growing at 3%.'

He added: 'Over this year our volumes have actually reduced a bit in the UK. We expect that trend to continue until there is a change in the economy, such as another recession.

'Our expectation is that we will probably continue to see some gentle reduction in that business because there is more and more credit choice for consumers.'

The company has been expanding into the Czech Republic, Poland, Hungary and Slovakia and Mexico since the late nineties to exploit new growth opportunities.

'We are continuing to maintain our UK market and expand into new international markets,' said Ashton.

It is also trialling a credit card in the UK, which has around 50,000 current users. The company is expected to decide whether to launch a full-scale card product in the first quarter of next year.

The Office of Fair Trading is currently investigating the UK home credit market in which Provident is the largest player, following a complaint about a lack of competitiveness from the National Consumer Council.

Provident has come in for criticism from consumer groups over its high charges for loans and allegations its agents pressure customers into topping up existing loans. For a £200 loan repayable over 55 weeks, the company charges a £130 fee.

Ashton said customers appreciate its fixed repayment fee policy because it allows them to budget effectively, adding it is not in their agents' interest to over-stretch customers because their commission payments are dependent on customers meeting repayment targets.